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Saving for Retirement: Household Bargaining and Household Net Worth

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  • Shelly Lundberg
  • Jennifer Ward-Batts

Abstract

Traditional economic models of savings treat the household as a single individual, and do not allow for the separate preferences of and possible conflicts of interest between husbands and wives. Since wives are typically younger than their husbands and life expectancy for women exceeds that for men, wives may prefer to save more for retirement than do their husbands. This suggests that households in which wives have greater relative bargaining power may accumulate greater net worth as they approach retirement. We explore the importance of bargaining in marriages of older couples by examining the empirical relationship between the net worth of couples in the first wave of the Health and Retirement Survey and factors that may affect the relative bargaining power of husbands and wives, such as control over income sources, relative age, and relative education. We find that measures of long-term relative bargaining power of wives have a positive effect on the household's wealth, even when controlling for other factors. In general, the realized effects of reforms intended to increase private saving for retirement may depend on how these reforms affect household bargaining relationships, as well as how they affect individual incentives to save.

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Paper provided by Department of Economics at the University of Washington in its series Discussion Papers in Economics at the University of Washington with number 0026.

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Date of creation: Jan 2000
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Handle: RePEc:fth:washer:0026

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  1. B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 1997. "What Accounts for the Variation in Retirement Wealth Among U.S. Households?," Working Papers 97035, Stanford University, Department of Economics.
  2. Lundberg, Shelly & Pollak, Robert A, 1993. "Separate Spheres Bargaining and the Marriage Market," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 988-1010, December.
  3. McElroy, Marjorie B & Horney, Mary Jean, 1981. "Nash-Bargained Household Decisions: Toward a Generalization of the Theory of Demand," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(2), pages 333-49, June.
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  6. Michael Baker, . "The Retirement Behavior of Married Couples: Evidence From The Spouse’s Allowance," Department of Economics 99-03, California Davis - Department of Economics.
  7. Bergstrom, T. & Bagnali, M., 1991. "Courtship as a Waiting Game," Papers 91-3, Michigan - Center for Research on Economic & Social Theory.
  8. Chiappori, P.A., 1989. "Collective Labour Supply and Welfare," DELTA Working Papers 89-07, DELTA (Ecole normale supérieure).
  9. Shelly Lundberg & Elaina Rose, 1998. "The Determinants of Specialization Within Marriage," Discussion Papers in Economics at the University of Washington 0048, Department of Economics at the University of Washington.
  10. Manser, Marilyn & Brown, Murray, 1980. "Marriage and Household Decision-Making: A Bargaining Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 31-44, February.
  11. Banks, James & Blundell, Richard & Tanner, Sarah, 1998. "Is There a Retirement-Savings Puzzle?," American Economic Review, American Economic Association, vol. 88(4), pages 769-88, September.
  12. Michael D. Hurd, 1999. "Mortality Risk and Consumption by Couples," NBER Working Papers 7048, National Bureau of Economic Research, Inc.
  13. Browning, M. & Bourguignon, F. & Chiappori, P.A. & Lechene, V., 1992. "Incomes and Outcomes: A structural Model of Intra-Household Allocation," DELTA Working Papers 92-23, DELTA (Ecole normale supérieure).
  14. Martin Browning, 1994. "The Saving Behaviour of a Two Person Household," Discussion Papers 96-09, University of Copenhagen. Department of Economics, revised Jan 1996.
  15. Michael D. Hurd & Kathleen McGarry, 1993. "Evaluation of Subjective Probability Distributions in the HRS," NBER Working Papers 4560, National Bureau of Economic Research, Inc.
  16. Smith, J.P., 1996. "Racial and Ethnic Differences in Wealth in the Health and Retirement Study," Papers 96-12, RAND - Reprint Series.
  17. Gustman, Alan L & Steinmeier, Thomas L, 2000. "Retirement in Dual-Career Families: A Structural Model," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 503-45, July.
  18. Blau, David M., 1997. "Social security and the labor supply of older married couples," Labour Economics, Elsevier, vol. 4(4), pages 373-418, December.
  19. Lundberg, Shelly & Pollak, Robert A, 1994. "Noncooperative Bargaining Models of Marriage," American Economic Review, American Economic Association, vol. 84(2), pages 132-37, May.
  20. Richard Disney & Paul Johnson & Gary Stears, 1998. "Asset wealth and asset decumulation among households in the Retirement Survey," Fiscal Studies, Institute for Fiscal Studies, vol. 19(2), pages 153-174, May.
  21. Blau, David M, 1998. "Labor Force Dynamics of Older Married Couples," Journal of Labor Economics, University of Chicago Press, vol. 16(3), pages 595-629, July.
  22. Shelly Lundberg & Robert A. Pollak, 1996. "Bargaining and Distribution in Marriage," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 139-158, Fall.
  23. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  24. Browning, Martin, 1995. "Saving and the intra-household distribution of income: an empirical investigation," Ricerche Economiche, Elsevier, vol. 49(3), pages 277-292, September.
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